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NAB share price sees modest gains following solid Q3 update

Revenue and earnings rose in the third quarter, while NAB has yet to provide concrete details on when the bank’s CEO in-waiting – Ross McEwan – will take over the top spot.

NAB share price rises on Q3 update Source: Bloomberg

When the National Australia Bank Ltd (ASX: NAB) reported its Q3 results this morning, investors responded with mild enthusiasm, bidding the bank’s share price as much as 0.65% higher just after the market opened.

Speaking of the bank’s third quarter trading update, NAB’s current CEO, Philip Chronican said:

‘Against the backdrop of a challenging operating environment, including subdued home lending growth, our 3Q19 performance compared with the 1H19 quarterly average is solid, with revenue increasing and costs flat.’

Business, always business

When the National Australia Bank Ltd released its third quarter trading update this morning, the bank reported unaudited statutory net profits of A$1.70bn, and A$1.65bn in unaudited cash earnings – a 1% increase year-over-year.

Revenue also increased, as NAB – known for their business lending when compared to the likes of Commonwealth Bank – continues to witness robust growth in (SME) small business lending.

NAB also noted that in the third quarter:

'Expenses we flat given ongoing productivity savings from the transformation program, compensating for higher compliance and risk costs.'

Even though these results were good, no further guidance was given on when NAB’s next CEO – Ross McEwan – would take the top spot.

As we reported previously, Mr McEwan is currently finishing up his duties as the CEO of the Royal Bank of Scotland.

Banking on the future

Today’s Q3 update, though short, provided further insight into some of NAB’s tech-focused initiatives.

Speaking to the bank’s forward-thinking nature, NAB reported that it has committed some A$2bn to funding emerging tech companies.

NAB, after all, was initially responsible for providing the now A$5.95bn Afterpay with a significant loan facility to help it expand its operations.

Lastly, the National Australia Bank Ltd also reported that it has established a partnership with ClimateWorks, with the aim of enabling ‘farmers to adopt sustainable and profitable land management practices.’

NAB share price: pieces of the puzzle remain

Uncertainty continues to linger over just how significantly NAB has been impacted by the Royal Commission. This uncertainty was likely one of the key drivers behind investors’ lacklustre response to the bank’s Q3 update this morning.

Here, NAB pointed out that:

‘Customer remediation programs and regulatory compliance investigations are continuing with potential for additional costs,’ with the bank further adding that ‘additional provisions are expected to be recognised in 2H19.’

Finally, NAB’s all-important CET1 ratio – came in at 10.4% for the third quarter and remains slightly under APRA’s ‘unquestionably strong’ requirement of 10.5%.

The National Australia Bank Ltd still has until January 2020 to meet APRA’s common equity threshold.

Analysts were bullish

Though the response from investors today was subdued, according to Bloomberg Data, NAB remains well-liked by analysts. Of the 15 analysts covering NAB, eight rate it a buy while only one rates it a hold.

Prior to the release of today’s Q3 trading update, NAB has also been one of the best performing out of the big four banks, rising 17% year-to-date.

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